UL product flexibility

[Benjamin]

Hi,

CMP Ch4 p.7 (Unit-linked contract > Needs of consumers) reads "This type of product also tends to be the least flexible in terms of how premiums or benefits can be altered."

CMP Ch4 p.20 (Risk of products to the insured > Unit-linked contracts) reads "Unit-linked contracts tend to be designed in a flexible manner so as to allow the policyholder to vary premiums and benefits over his or her lifetime."

Could you please clarify?

 

[Mark Willder]

Hi,

CMP Ch4 p.7 (Unit-linked contract > Needs of consumers) reads "This type of product also tends to be the least flexible in terms of how premiums or benefits can be altered."

CMP Ch4 p.20 (Risk of products to the insured > Unit-linked contracts) reads "Unit-linked contracts tend to be designed in a flexible manner so as to allow the policyholder to vary premiums and benefits over his or her lifetime."

Could you please clarify?

Your first quote refers to without-profits contracts, while the second quote refers to unit-linked. We'd normally think of unit-linked as being the most flexible.

This is clearer if we look at the Core Reading on page 7 in full:

From the consumer’s point of view, the guarantees of conventional without‑profits products come with a higher cost. This type of product also tends to be the least flexible in terms of how premiums or benefits can be altered. At the other extreme, a unit-linked contract enables consumers either to obtain a higher expected level of benefit for a given premium or to pay a lower expected level of premium for a given level of benefit, than under a comparable non-linked version of the contract.

Best wishes

Mark